Salespeople are constantly urged to listen to their customers. But sometimes wise sales departments can learn from listening in the other direction: to the best salespeople and sales organizations that sell to them. This is especially true when these organizations have had to rethink their own sales strategies and have done so successfully.
Leonard Frey specializes in customer relationship management (CRM) at IBM Business Consulting Services. Colleen Honan is senior vice president for world-wide sales and support at OneSource Information Services, a provider of business intelligence. Both Frey and Honan sell to sales departments and often use their own companies’ experience to help their customers.
Despite the difference in scale and activities between IBM and OneSource, there are common themes in their selling. Both firms put major emphasis on allocating their potential markets into the right segments, or channels, and assigning just the right resources to these channels. And Frey and Honan stress the necessity of having a clear process for selling to each segment of the market.
Another common theme is information. Honan emphasizes the information that goes into effective high-value selling, arguing that you must specify your sales process to include collection and analysis of this information. Frey emphasizes the other end: the information you want coming out of sales that allows you to measure performance. Unless your sales process has common steps and consistent definitions across all channels, Frey says, you cannot really measure its performance accurately.
“My mantra is that there needs to be both a clear strategy and a very clear sales process,” Frey summarizes. This was especially necessary at IBM, due to the sheer size and complexity of its business.
The Rule of Three
IBM is organized into three business units: hardware, software, and services. Services are in turn broken down into information technology services, outsourcing services, and business consulting. The consulting unit – Frey’s group – is organized by industry sector.
The first strategic selling decision is channel strategy. Frey says there are still many Fortune 500 companies that have not really decided on their channel strategy. Many still have not divided customers into those to be sold through direct versus indirect channels. These companies may use both direct and indirect channels on a daily basis, but segmentation has not been done clearly according to business strategy. “Having a clear channel strategy is the first and most fundamental key to being effective,” Frey says.
The next step is aligning the internal organization with the channel strategy. Who will cover each type of account, and how? This requires clear answers to further questions.
Is the customer small, medium, or large? Is it an enterprise customer? Does the company have alliances with other firms that will sell to the customer? Classifying accounts allows a company to determine the right approach to each account to both control costs and maximize revenue. “It also simplifies operations, so you are not dealing with hairballs all the time,” Frey says. “If you do not clarify channels and align your internal organization with channels, you will find it impossible to simplify.”
IBM divides clients into three tiers, with the largest or highest-value clients in the top tier. Top-tier accounts get leaders from all three of IBM’s business units – hardware, software, and services – plus an umbrella leader responsible for building the relationship. “The umbrella leader adds value by leveraging our capabilities, such as outsource hosting, software expertise, and even bringing in Nobel Prize winners to get their insights,” Frey explains. “They weave together the consulting value proposition.”
The first segmentation is often divided into direct and indirect channels. Direct sales channels include activities the company manages, telesales on inbound calls, order taking, cold calling, and prospecting. Indirect channels are all sales-managed by other firms. Dividing prospects or clients between direct and indirect channels saves money and may gain revenue.
For example, one IBM client was using a standard territory model for retail sales. Within each territory, a general manager ran marketing, service, and support, separately from other territories. “Each general manager had created his own little business universe for that territory channel,” Frey explains.
The solution was to realign the sales organization in a matrix form. Some functions were left under territory management. But the company extracted from territory managers other functions that were nonproductive, overlapped, or could be done more efficiently at higher levels. “We helped them build collaborative support teams, and that left the selling teams to sell.”
Another IBM client, a broadcasting company, received 90 percent of revenue from indirect channels and 85 percent of revenue from residential consumers. Frey judged the company could get more commercial revenue from a more balanced mix of channels. He urged the client to shift to more direct channels to pursue commercial accounts and build relationships. The company had left money on the table by developing its channels before it analyzed what total sales opportunities were in its various markets.
The next basic step is to develop a generalized sales process that is flexible enough to be customized and applied to all channels, types, and sizes of customer. At IBM, the common sales process is divided into seven steps: noticing the potential customer; identifying customers; validating; qualifying; making a conditional sale; agreeing on the final sale; and implementing the deal.
The Rule of Management
Frey does not coach all IBM clients to do things the same way IBM does them. Companies with businesses similar to that of IBM may find IBM’s approach suitable. Other clients in much different businesses will implement the approach in different ways. Yet Frey argues the basic steps are the same: a clear channel strategy, internal realignment, a common sales process across channels, and a management system that is then automated.
The common sales process is crucial, because it facilitates taking the next step, managing sales opportunities. This includes managing the sales pipeline, sales forecasting, and performance management. A sound approach to performance management in turn enables the final step, automation with information technology.
Solid performance management includes much more than just ranking reps. Companies must measure average sales productivity and track its variation over time. They should know how effective each sales unit is at closing deals, what the average size of the deal is, and what the typical duration of the deal will be.
These and other performance measures should be easily available on a consistent basis for every sales channel, indirect as well as direct. Frey calls them key performance indicators (KPIs). When you understand the causal relationships between KPIs, you understand how you can make your sales effort better. Then you can start specific projects to improve each link in the overall chain.
Frey advises IBM clients to go through the same basic steps that IBM did, rather than seeking instant improvement from just automating reports on their existing sales process. Too many companies want quick returns from buying or installing fancy IT systems. Frey illustrates the right way to do it in Microsoft terms: Outline the process in Word, analyze it in Excel, then collect data in Access. When you have a logical system to measure performance, you can then automate to do it “better, faster, and cheaper.”
Frey still runs into resistance. One IBM client wants to use a high-end sales management system to track activities in three sales channels. But each channel uses a different sales process. Frey fears the results will be confusing, fail as meaningful comparisons, and not yield much improvement.
Another client wanted to define a sales process by describing tasks in only one channel, which differed from those used in other channels. Frey urged the client to settle on a common process and then fit tasks in each channel into this process. “You have got to have a single sales process to make it operationally effective. Technology will not fix problems if you do not have a common process.”
Furthermore, there is no off-the-shelf software that measures sales performance in all its dimensions. “There is no perfect tool out there,” Frey says. “It takes a mixture of business analytics and incentive compensation. I do not see anyone selling it all in a prepackaged form.”
The Rule of Information
OneSource is an information provider that supports all stages of the sales process: identifying leads to pursue, obtaining business intelligence for the first phone call, getting ready to meet the prospect, researching to enhance the odds of final sales, and staying abreast of important developments of current customers. “The greatest thing about selling a tool like OneSource is that we are selling to salespeople, we know what leads are, and we know about all the pains and issues associated with the sales process,” explains Honan.
OneSource reps present their product as a step in the sales process. “But a lot of clients do not have a well-defined sales process,” Honan says. “Or they tend to think that collection of business intelligence will just happen when reps go on the Web or read an annual report.” Honan argues that sales information must be easy to access and provide exactly the information needed at each step of the process. OneSource’s own experience in reforming strategy and process may be useful.
The OneSource salesforce is now split into hunters, who go after new customers, and farmers, who seek to up-sell and retain existing accounts. Once, the same reps did both the hunting and farming. “We found we were getting very good retention and up-selling, but not winning enough new customers,” Honan recalls. “Reps were spending all their time on retaining and up-selling. Hunters were farming.” New business development has been much stronger since the two roles were separated.
OneSource also segments its market along several other lines. Strategic teams go after businesses with annual revenue over $250 million, and these teams tend to specialize by industry, such as insurance, banking, high-tech, software, and professional services. Individual reps take the small- and medium-size prospects and customers and are generally assigned geographical territories.
Behind both groups stands a support staff that researches the companies to be contacted. Researchers use OneSource’s Business Browser to look for new prospects and keep up with existing accounts. “They look for key issues and key executives and learn about the company’s corporate structure,” Honan explains. “Then they turn this information over to the hunters before cold calls.”
One major use of business intelligence in OneSource’s own sales process is preparation for the in-person sales call. Honan’s reps have a standard template in Microsoft Word that must be filled out and reviewed with management before the first call.
Reps are responsible for filling out part of this call-preparation template, including the objectives of the call. But OneSource’s Company Insight module automatically populates the fields in the template that characterize the company, its major challenges, and recent developments. “Some of our customers use different templates, but we help them prepopulate the form with key executives and the most recent news,” Honan explains.
Another standard step in planning for larger accounts is a 15- to 20-page account plan. This is organized in the ‘SWOT’ format: the Strengths, Weaknesses, Opportunities, and Threats that characterize the company. “We want to understand the opportunities they have in the marketplace where can we help, the weaknesses that we can shore up, and the competitive threats they face,” Honan notes. Here again, OneSource data is extremely helpful but requires analysis to complete the SWOT exercise.
Farmers and their research staff use the OneSource alert system to stay on top of existing accounts. Have key contacts within the account left or been reassigned? Who replaced these contacts, and what is their work history? Is the company expanding abroad? And what are its competitors up to? Knowing the answers to these questions as rapidly as possible is key to keeping and up-selling any company’s most profitable accounts.
Profitable farming requires that everyone involved, account reps and customer support staff, is trained to know customers and constantly look for opportunities to serve them better or upgrade services. Honan herself gets these email alerts the first thing each morning. “I take a quick look and start popping notes off to sales managers,” she says. “Most of the time, account reps have already read the alerts.”
That is just part of the sales process. •